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Thursday, November 20, 1986 / University Daily Kansan
SEC chair says illegal trading rare
United Press International
WASHINGTON — The chairman of the Securities and Exchange Commission said yesterday that despite the abuses exposed by the Ivan Boesky scandal, the average investor on Wall Street is "being extremely well treated."
"Yeah, there's abuse out there. There's too much of it. But it shouldn't be exaggerated out of proportion." SEC chief John Shad said. "The amount of questionable activity on the market, by the wildest conjecture, is a fraction of 1 percent."
But Shad said that Boesky, who was forced to give back $50 million in ill-gotten stock profits and pay another $50 million in fines, could be just the tip of the iceberg in a
far-reaching stock market scandal.
Shad, in an interview on Cable News Network, said his agency had a lot of work to do before finishing its investigation of Boesky, a leading corporate raider now barred for life from the stock business.
"It's not possible to predict how long or how far we will go," he said.
Rocketing numbers of mergers and hostile takeovers in U.S. business afforded increasing opportunities to engage in the illegal insider trading, Shad said.
"There were articles appearing in the press and very responsible publications saying that insider trading was so pervasive nothing could be done about it.
"I think a lot of people took that as a license to engage in the activity," Shad said. "We've now demonstrated something could be done about it."
But the SEC chief warned that insider trading — the illegal use of confidential business information — should not be blown out of proportion by small investors even though it has had an effect on the stock market.
"We've got the best markets the world has ever known," he said. "The average investor is being extremely well treated."
Shad also said he is alarmed that many of Wall Street's young stars appear involved in the scandal.
"There 's so many of these young people that are in their early 30s,
making six-figure incomes, exceptional prospects ahead of them for outstanding careers," Shad said.
It was investment banker Denis Levine who, after his arrest, led SEC investigators to Boesky.
In a recent talk at the Harvard Business School, Shad wondered whether the recent spate of illegal trading occurred "because the temptations have become so great people are willing to step beyond the line, or if it's just the challenge of seeing if you can beat the system more.
"I think that's the more serious question; whether there's actually been a change of moral attitude. I think the latter is a very significant factor. I think they're all three involved."
Market turmoil over scandal subsides
United Press International
NEW YORK - Turmoil in stock and bond markets surrounding the Ivan Boesky insider-trading scandal subsided yesterday as prominent investors who have been associated with Boesky denied being involved with his illegal dealings.
Boosky was fined $100 million in penalties for illegal trading on information that was not available to the public, mostly involving mergers and takeovers financed by high-yield junk bonds. These are bonds for which the credit standing of the issuer is not good enough to be rated.
The Dow Jones industrial average, which plunged 43.31 points Tuesday amid nervousness over the implications of the scandal, rose 9.42 points yesterday. The
Treasury and corporate bond markets recouped Tuesday's sharp losses with gains of about one point.
But the high-yield junk bond market, which lost 6 to 8 points Monday and Tuesday (each point represents $10 on a $1,000 bond) remained "flat on its back," one bond dealer said. "There is a great veil of gloom because nobody knows about Drexel, which is the underwriting of the market."
Drexel Burnham Lambert Inc. is the largest player by far in a huge and growing market. Its largest customers for junk bonds have often been investors such as Boesky.
"Everybody who is involved in this market is afraid of a worst-case scenario — of Drexel being put out of the junk bond business, leaving no one to make markets," the bond dealer said.
Meanwhile prominent takeover players whose names have been associated with Boesky rushed to disavow him.
New York investor Carl C. Icahn, in a letter to employees of Trans World Airlines and ACF Industries, two companies he controls, denied he had ever had any dealings with either Boesky or Dennis Levine, a former Drexel executive who was fined more than 10 million for insider trading.
"I should like to state categorically that I have never traded on inside information nor have I ever had any dealings in any way, shape or form with Dennis Levine." Icahn said in a statement.
Icahn further said although he had been kookey for "a number of years" he had never had any business arrangements with him.
Information from Levine led to
Boesky's downfall. Reports that Boesky, in turn, implicated others fueled this week's market turmoil.
fueled this week's market turmoil. Revel Group Inc. Chairman Ronald O. Perleman, whose attempt at a hostile takeover of Gillette Co. is being financed by Drexel junk bonds, said he had been assured by Drexel it could obtain financing for the acquisition.
Perleman branded Gillette's charges that he tipped off traders to his takeover plans "a desperate and untruthful attempt to taint this in offer in light of totally unrelated events of the past week."
Perleman said neither he nor his companies "have ever had any business dealings with Ivan Boesky or any of his entities."
The Securities and Exchange Commission has refused to comment on any of the speculation, but indicated that the latest revelations were not the end of it.
New senators learn ropes in Washington
United Press International
The new Senate members — 11 Democrats and two Republicans — gathered in the Capitol for bipartisan orientation sessions. Today they will elect party leaders for the 100th Congress, which convenes Jan. 6.
WASHINGTON — The Senate's new members got a cram course in perks and procedures yesterday during their orientation session.
democrats, with the help of the newcomers, seized control of the Senate in the Nov. 4 elections and will have a 55-45 majority next year.
Robert Byrd of West Virginia, who has led the Democrats for 10 years, was assured election as Senate Democratic leader. Robert Dole of Kansas, the GOP leader for two years, will remain as Republican leader. Neither faces opposition.
In uncontested elections for Democratic leadership posts, Alan Cranston of California won another term as assistant leader. Daniel Inouye of Hawaii will serve as secretary, and John Kerry of Massachusetts will be the new campaign chairman.
The Republican incumbent leaders
also faced no opposition. Alan Simpson of Wyoming will serve as assistant leader, William Armstrong of Colorado as head of the policy committee, John Chafee of Rhode Island as conference chairman and Thad Cochran of Mississippi as conference secretary.
succeed Rudy Boschwitz of Minnesota will succeed John Heinz of Pennsylvania as campaion chairman.
Former North Carolina Gov. Terry Sanford, 69, said the administration's sale of arms to Iran in exchange for American hostages "doesn't look regular" and "certainly needs to be
looked into.
Sanford said the fact that so many Americans did not believe Reagan's explanation of the deal showed that his Teflon was wearing thin and that blame was sticking to him.
ons administration is in very real trouble on the Iran situation," said Timothy Wirth, D-Colo. "The American people just aren't buying it."
Even Phil Gramm, R-Texas, said the arms shipment "was not a very smart move," although he predicted the issue would "die down as quickly as it flared up."
Agency may fine booster maker $10 million
United Press International
HUNTSVILLE, Ala. — Marshall Space Flight Center officials may penalize shuttle booster maker Morton Thiolkol Inc. $10 million because of the Challenger disaster, a NASA official said yesterday.
A provision in Thiokol's contract allows the space agency to cut payments to the company by $10 million for a "critical 1" failure, said Daniel R. Clough, a contract officer at the Marshall facility where the booster program is managed.
Criticality 1 shuttle systems are those in which a failure can lead to a loss of vehicle and crew. The booster-joint rupture, which doomed Challenger Jan. 28, was blamed in part on the failure of rubber O-ring seals that were classified criticality 1.
"We're doing a careful assessment of what's in
the presidential (commission) report that would lead to a decision whether to reduce the fee," Clough said in a telephone interview.
He said that theoretically the penalty could be levied at the Marshall center level, but that a decision probably would be made by NASA headquarters in Washington.
Clough said that several people were involved in comparing the contractor's performance with the recommendations and findings of the Rogers Commission report on the Challenger disaster, which claimed seven lives.
He said a report should be ready in the near future.
While the action contemplated by NASA technically is a fee reduction, a report by the House Science and Technology Committee said the
Utah company hadn't been penalized under its contract with NASA for numerous "long-festering" problems with the shuttle rockets. Instead, the company is eligible for a $75 million incentive award.
"Under its NASA contract, Thiolol was never penalized for any of the numerous flight anomalies," the report said. "The booster joint had never worked as intended nor was its behavior at ignition ever clearly understood."
Clough said the only contract provision for penalties was $5 million for failure to achieve orbit and $10 million for loss of life or loss of the orbiter. He said Thiokol could appeal a penalty decision.
The Challenger's external tank exploded after hot gases burned through a faulty joint in one of two solid rocket boosters and into the tank.
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Holiday Preview Night in Downtown Lawrence Friday, November 21 7-9 p.m. Come downtown to see the new holiday merchandise and meet the downtown merchants. Refreshments served in most stores Carriage rides 7-9 p.m. Old Fashioned holiday hospitality at its best.
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January 3-10, 1987
Five nights at LaCasa (ski-in, ski-out condo)
plus bus, lift ticket, ski rental, party.
All for only $3571
SIGN-UP DEADLINE: Tuesday, November 25, 1986
For More Information: SUA Office 864-3477
LIVE ELECTION COVERAGE KU Student Senate Thursday, November 20th 7 p.m. every half hour until the results are in.
Portrait of BYU's founder redone to remove his beard
United Press International
PROVO, Utah — A portrait of Brigham Young University's founder on a campus directory was redone to remove his beard, apparently because BYU students are forbidden to grow beards.
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R. Michael Whitaker, director of University Standards, said officials had the portrait of school founder Karl T. Maesar redone to remove his beard to deflect student criticism of the Mormon school's ban on beards.
BYU students frequently point out pioneer leader Brigham Young, church president from 1847 to 1877, and many early Mormon leaders had beards, he said.
All church presidents wore bears from the time Mormon pioneers settled in Utah 139 years ago until the Civil War II, all have been clean-shaven.
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BYU student Glenn Larson, Sun Valley, Calif., was critical of the removal in a letter published yesterday in the student newspaper.
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